On September 30, 2026, Governor Gavin Newsom signed Assembly Bill 1776, the Competition and Opportunity in Markets for a Prosperous, Equitable and Transparent Economy Act (the “COMPETE Act” or the “Act”). The Act amends the Cartwright Act, California’s principal antitrust statute, to now prohibit monopolization and monopsonization by a single firm. The Act takes effect on January 1, 2027.
Background
Since its enactment in 1907, California’s antitrust act, the Cartwright Act , has only reached concerted conduct—combinations and agreements among two or more persons, analogous to Section 1 of the Sherman Act. As a result of this limitation, unilateral exclusionary conduct in California has historically been addressed under Section 2 of the Sherman Act. The COMPETE Act grew out of the recognition of this weakness in state law and a resulting California Law Revision Commission’s multiyear study of state antitrust law (Study B-750), which began in 2022 and produced a recommendation on single-firm conduct. The Legislature passed the final, amended bill at the end of August 2026, and Gov. Newsom signed it on September 30, 2026.
The Core Prohibition
The COMPETE Act makes it “unlawful for every person to monopolize or monopsonize, attempt to monopolize or monopsonize, maintain a monopoly or monopsony, or combine or conspire with another person to monopolize or monopsonize any part of trade or commerce.” The language tracks Section 2 of the Sherman Act, with two textual differences of note: an express prohibition on monopsonization (which federal courts have read into Section 2 but which Section 2 does not state), and an express reference to maintaining a monopoly or monopsony.
- Public enforcement only. Actions may be “initiated only by the Attorney General or a district attorney.” The Act further provides that an alleged violation of § 16731 “shall not serve as a predicate violation” under the Unfair Competition Law (Bus. & Prof. Code § 17200), foreclosing derivative private claims.
- Substantial market power. A plaintiff must “allege and, to prevail at trial, prove substantial market power, either through direct or indirect evidence.” The term is not defined. Federal courts have long used the phrase to describe monopoly power, and some commentators read the two standards as equivalent.
- Analytical framework. Courts must apply the framework identified by the California Supreme Court in In re Cipro Cases I & II, 348 P.3d 845, 861-863 (Cal. 2015), under which the plaintiff establishes anticompetitive effects and the defendant may then offer procompetitive justifications—in substance, a structured rule-of-reason approach.
- Small business exemption. The prohibition does not apply to independently owned California businesses whose principal office is in California, whose officers are domiciled in California, and which, with affiliates, have 100 or fewer employees and average annual gross receipts of $10 million or less over the three years preceding the complaint.
- Government-authorized conduct. The Act does not reach exclusive franchises, contracts, licenses, or permits granted and supervised by a governmental agency, or conduct required or authorized by state or federal law that is granted and supervised by such an agency.
Of note, the Legislature removed a proposed, undefined prohibition on unilateral “restraints of trade,” along with language that would have expressly displaced U.S. Supreme Court precedent on refusals to deal, predatory pricing, and multi-sided platforms. A proposed finding endorsing the 2023 federal Merger Guidelines was likewise struck.
Rules of Construction and Relationship to Federal Law
Although the operative text resembles Section 2, the Act states that the Cartwright Act is “broader in range and deeper in reach” than the Sherman Act and that interpretations of federal antitrust law are “at most instructive.” It directs courts to “liberally interpret” California’s antitrust laws and to be mindful that California favors “maximizing” effective deterrence, including as to labor markets. The findings identify areas where California law has departed from federal law, such as “lower actionable market shares,” indirect purchaser recovery, and differing burdens of proof. At the same time, the Act “affirms” that a business “may lawfully obtain and maintain market power or monopoly power through the superiority of its products, services, or business acumen.”
In his signing message, Governor Newsom supported targeting conduct that harms consumers, workers, and businesses, but cautioned against “dragging legitimate, superior business practices and products into the ambit of anti-competitive behavior,” and acknowledged that “additional legislation may be required to clarify the appropriate standards.”
Remedies
Public enforcers may pursue the remedies available in other Cartwright Act actions, including treble damages, injunctive relief, and civil penalties. Where a COMPETE Act violation is pleaded as a predicate for a public Unfair Competition Law (“UCL”) claim, enforcers may also seek restitution and additional civil penalties, and these remedies are cumulative. The Cartwright Act’s criminal provisions also remain available, although criminal prosecutions under the statute have historically been rare.
Practical Considerations
- Enforcement exposure is concentrated. Removing the private right of action eliminates private treble-damages and class exposure under the new section, but enforcement discretion now rests with the Attorney General and district attorneys applying a new and untested standard.
- Uncertain role of federal precedent. Courts will need to decide how much weight to give Section 2 case law, particularly on refusals to deal and predatory pricing, where the Legislature deleted language displacing federal precedent without affirmatively adopting it.
- Labor markets. The Act makes competition for workers an express purpose of the Cartwright Act. Single-employer conduct alleged to create or maintain buyer-side power in a labor market may now be challenged.
- Foreclosure-based theories. Exclusive dealing and similar claims may be assessed against a lower foreclosure threshold in California than in federal court, consistent with existing California authority.
- Timing. With an effective date of January 1, 2027, companies with significant California operations may wish to review pricing, distribution, exclusivity, and employment practices in light of the new provision.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
[View Source]